India moves to set up industrial parks with China

NEW DELHI, June 25 (Reuters) - India has moved a step closer
to establishing industrial parks with China, the country's law
minister said on Wednesday, as New Delhi looks to rebalance a
$40 billion trade deficit with its northern neighbour.

Ravi Shankar Prasad told reporters that India's cabinet had
approved in principle a memorandum of understanding between the
two countries for setting up the parks.

The details of the agreement would be available only after
the memorandum was signed, Prasad said, but the expectation is
that China will invest in low-tax special economic zones and
manufacturing hubs in India, which would reduce the need for
India to import Chinese goods.

While New Delhi has long pushed for greater market access to
cut the deficit, pushing through a firm agreement to bring
Chinese investment into India would signal the intent of new
Prime Minister Narendra Modi's push to expand manufacturing and
revive the country's flagging economy.

Earlier this month China's Foreign Minister Wang Yi met his
Indian counterpart Sushma Swaraj in New Delhi and raised the
possibility of China investing in industrial parks in India.

Previous efforts to set up the parks have stalled, partly
because of Indian security concerns about Chinese companies
setting up factories inside the country.

While China and other developing countries have capitalised
on relatively cheap labour to expand rapidly their manufacturing
base over the past two decades, manufacturing in India accounts
for just 15 percent of economic output.

China's own embrace of an export-led model has helped its
economy outgrow India's fourfold since 1980.
(Editing by Alison Williams)